Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
Photo: Kiyoshi Ota/Bloomberg via Getty Images

Is Peter Thiel the most powerful venture capitalist in the world?

Peter Thiel in 2019

Hello and welcome to Pipeline. This week: compliments for Elizabeth Holmes; the startup that wants to bring back the woolly mammoth (seriously); and why Peter Thiel's power is cultural, not political.

Overheard

  • "If this had happened in our 20s, God help us," Mailchimp co-founder Ben Chestnut said after he got a multibillion-dollar windfall this week. After the $12 billion sale of his bootstrapped company to Intuit, he told Axios his big splurge will be to buy a new mountain bike.
  • Move over, Ashton. Owen Wilson and Woody Harrelson might be the next top celebrity investors, having invested in Canva six years ago at a $150 million valuation. It's worth $40 billion after a funding round this week.
  • "You're a good mom." A spectator in line for the Theranos trial cheered Elizabeth Holmes' arrival and complimented her on the birth of a boy in July (a life development that's been met more with cynicism than praise). In other weird courthouse happenings, NPR revealed that Holmes' father-in-law went undercover to jury selection last week and posed as a "concerned citizen" named Hanson.
  • Who Gives a Crap? Investors who just dumped $30.7 million into the best-named toilet paper startup I've ever heard of. Let's hope their investment doesn't get wiped out.

Biz on Biz

Is Peter Thiel the most powerful venture capitalist in the world?

Peter Thiel is mysterious, insanely rich and a disruptor. After interviewing more than 150 people in the "Thielverse," author Max Chafkin argues in his new book, "The Contrarian," that Thiel is also the most powerful venture capitalist in the world.

Chafkin believes Thiel's power isn't just political via his Trump connections. He thinks it's cultural, too. "There's an entire generation of VCs and entrepreneurs who think, talk like this guy, even though some of them are 180 degrees from Donald Trump," Chafkin told me in an interview this week after I read an advanced copy of his book. "In a lot of ways they've adopted a lot of [Thiel's] way of thinking and the Thiel worldview."

He attributed three main Silicon Valley things to Thiel:

  • Founder-friendly: "The idea of founders as this special class of businessperson and the founder knows best and that venture capitalists and everyone should kind of venerate them — to some extent, I think that comes from Thiel and Thiel's collaboration with Mark Zuckerberg," Chafkin said. It was to the point that Thiel named his venture firm Founders Fund based on the idea, and positioned himself to compete against his longtime foil Mike Moritz as a challenger to Sequoia.
  • Blitzscaling: While the term is now marketed most by Thiel's friend Reid Hoffman, Chafkin argues that it was the shared experience they had at PayPal that was foundational to the idea. Thiel's book "Zero To One" is seen as required reading for a lot of startup founders.
  • Disruption: Thiel's contrarianism spilled into the idea of how startups should build, starting with the Facebook motto of "move fast and break things." Now startups are all about disruption. "It's not only to break the rules, but it's almost preferable to do so and breaking the rules becomes good," Chafkin said.

Is he the most powerful venture capitalist though? A big theme to Thiel's life and investing success is that he hasn't been a true venture capitalist if you think of a VC as someone who goes all in on risky bets.

  • "He's a hedge fund man," Chafkin points out, and a theme over and over again is all the times Thiel hedged, from having a bunker in New Zealand as an end-of-the-world escape to trying to sell PayPal the entire time he was running PayPal. "When I talked to people who worked at his investment firms, they said this is absolutely something he does. He has two portfolios: an optimistic portfolio and a pessimistic portfolio," Chafkin said.
  • One example was his first check given to Facebook, which wasn't a pure investment but initially structured as a $500,000 loan that Mark Zuckerberg would have to pay back unless he reached 1.5 million users and revised the structure of the company. (Disclosure: My husband works at Facebook.)
  • "Hedging has worked out for Thiel to a large extent. It's probably limited his upside. He's definitely not as rich as he could be," Chafkin said. "But I think it also probably gives him a certain power. When you behave differently and when you approach problems differently, that can sometimes give you an edge, and I think that's part of what's helped him compete. He definitely cuts against the stereotype."

One question I had for Chafkin: Does he think Thiel will sue him for the book? After all, Thiel is notorious in journalism circles (and the larger public) for secretly funding Hulk Hogan's lawsuit against Gawker, which bankrupted the company.

  • "People keep asking me, 'Are you afraid of Peter Thiel?' and the answer is yeah, but not really any more afraid than I am of any billionaire," Chafkin said. "He's created this playbook that anyone can use and potentially silence media outlets, and I think that is something that's worth talking about."

But "How does the mafia feel about this?" is the question Chafkin got more often while reporting this book. For all of Thiel's cultural influence, a key part of his power has been his ties to the "PayPal mafia," a group of early employees including Hoffman, Elon Musk, Max Levchin, David Sacks and Keith Rabois who all feature prominently in "The Contrarian." They've stuck by each other with intense loyalty (just with none of the violence) that a mafia entails, and it's another factor that makes Chafkin view Thiel as the most powerful venture capitalist in the world.

A MESSAGE FROM FIREWALL

Where tech meets politics. Each week, Bradley Tusk breaks down the trends, policies and regulations that affect everyone from scrappy startups to the giants of Silicon Valley. He interviews founders, elected officials, journalists and scholars, including Anthony Pompliano, Scott Galloway, and Mayor Francis Suarez.

Learn more

Inside Track

  • It's not about the MVP, it's the MVT. Maven founder and serial entrepreneur Gagan Biyani makes an argument for minimum viable tests.
  • What's changing in venture capital? "On the one hand, you're overpaying for every investment and valuations aren't rational. On the other hand, the biggest winners will turn out to be much larger than the prices people paid for them and this will happen faster than at any time in human history," writes Upfront Ventures' Mark Suster in his explanation of the VC landscape and why his firm is taking a "barbell" approach.
  • Tiger may have changed the game, but Akash Bajwa says Coatue is the cub that's also on the prowl.
  • Few startups have had the trajectory of video events service Hopin, so Dave Schools shared his perspective as an early team member on what he learned when a startup grows from $0 to $7.75 billion in two years.

Need to Know

  • Speaking of Canva, it's now one of the most valuable startups in the world. The Australian startup raised $200 million at a $40 billion valuation. Its founders have also pledged to give the majority of their shares to Canva's foundation.
  • Jeremy Liew won't be a part of Lightspeed's next fund. The noted Snap investor who also was part of this year's Affirm and Honest IPOs is moving to a support role.
  • App Annie is paying $10 million to settle an SEC securities fraud case. The SEC said the site told app developers it would use their data one way but broke the promise and sold confidential data to trading firms.
  • Insider NFT trading? OpenSea's head of product bought NFTs he knew were going to be displayed on the front page and then sold them for a profit. He's now out of the company following an investigation.
  • Not-so-Genius. The annotation website that was supposed to be "the future of journalism" never made it out of annotated lyrics. It was certainly useful, but ended up being sold for $80 million — less than it had raised from VCs like a16z.
  • Comings and goings at Coinbase. A year after joining from a16z, Kim Milosevich is leaving the company. Meanwhile, after being the rare CVC with no team, Coinbase added Katherine Wu.
  • Release radar: Serial entrepreneur Ben Lamm has teamed up with famed geneticist George Church on Colossal — a new startup meant to bring back the woolly mammoth. It even has all the buzzwords like "thoughtful disruptive conservation" and "de-extinction toolkit".
  • On Protocol: This week in the Theranos trial, whistleblower Erika Cheung testified that the machines failed quality control tests over 25% of the time.
  • Also on Protocol: When COVID rocked the insurance market, this startup saw opportunity.
  • Your weekend reading: Couchsurfing was regarded as one of the best free internet projects and its staff lived together communally, traveling the world. That is, until it raised venture capital from folks like Benchmark and ended up with an ex-Palantir CEO. Input Mag has the story on the rise and ruin of Couchsurfing.

Five Questions for...

SoftBank's Lydia Jett

Lydia Jett scored a big win earlier in 2021 after her investment Coupang went public. A partner at SoftBank Investment Advisers, which manages the Vision funds, she's made investments into companies like Embark, Fair and mmhmm. Before SoftBank, she worked at growth equity firm M/C Partners and was an associate at Goldman Sachs.

If you could have dinner with any tech executive you haven't met, who would it be?

Reed Hastings. I am fascinated by people who challenge widely accepted norms and continuously reinvent their companies. It takes vision but also extraordinary conviction to push an organization to accept change.

What product or service are you totally, even irrationally, loyal to?

Tesla. I have been on their waiting lists a few times (including a solar waiting list for a truly irrational period of time), but have never given up. Their products have changed my expectations around what driving should look like.

What is the biggest issue that your partners are thinking about at your Monday partner meeting?

The rapidly accelerating pace of change, how competitive venture capital has become, how increasingly active governments around the globe are in regulation of technology and how much incredible consumer and business demand for best-in-breed products remains up for grabs.

What book do you think every startup founder should read?

"Attention Factory," by Matthew Brennan. It is the story of TikTok and Bytedance, and is a great lesson in that sometimes you must step outside your lens of the world to see how much bigger you could be thinking.

What problem do you want to see a startup solve?

Bringing the U.S. together around a commonly accepted reality.

A MESSAGE FROM FIREWALL

Where tech meets politics. Each week, Bradley Tusk breaks down the trends, policies and regulations that affect everyone from scrappy startups to the giants of Silicon Valley. He interviews founders, elected officials, journalists and scholars, including Anthony Pompliano, Scott Galloway, and Mayor Francis Suarez.

Learn more

Thanks for reading this week's Protocol Pipeline. If you like what you're reading, sign up here to get it in your inbox. Send story tips and newsletter feedback to biz@protocol.com.

Recent Issues